3346: Co-operative
organizations

A co-operative business organization is
set up in such a way that it is obliged according to its constitution to give ten percent
of its net profits to charitable causes. Does it have to pay zakaat on its profits?

Published Date: 1998-12-23

Praise be to Allaah.

This co-operative business organization is governed by the same rules
as other business organizations: it must pay zakaat on its wealth. What you have mentioned
about it being set up in such a way that it has to give ten percent of its net profits to
charitable causes does not mean that it is exempt from having to pay zakaat. The ten
percent referred to in the question is like voluntary charity (sadaqah), and
sadaqah does not replace zakaat, because zakaat is an obligatory act of worship which must
be carried out with the appropriate intention (niyyah). This amount of ten percent is not
being paid as zakaat; it is being given as a voluntary act of charity. So this
co-operative organization has to pay zakaat. And Allaah knows best.